Blog: Now Buffett wades into PepsiCo debate
Dean Best | 3 March 2014
PepsiCo on front foot over calls for split
Famed US investor Warren Buffett has become the latest big beast on Wall Street to comment on whether PepsiCo should split in two.
The pros and cons of whether the Lay's chips and Pepsi cola should divide is a hot topic in FMCG circles in the US at the moment.
Activist US investor Nelson Peltz is pushing for PepsiCo to become two businesses, one focusing on food, the other on drinks. PepsiCo has stood its ground and said it is a better business as one. (It is incidentally, embarking on a quiet PR battle, alerting us to Buffett's CNBC appearance, for example).
PepsiCo's shareholder base is said to be split over the split. Buffett and his Berkshire Hathaway investment fund does not own shares in PepsiCo but, in an interview on CNBC today (3 March), the so-called Sage of Omaha was asked for his opinion on Peltz's proposals.
"I don't think I'd split it up," he said. "I think that Frito-Lay is an extremely good business. It’s a better business than the soft drink business, but I think the soft drink business is a good business too and I don't see any reason to split them up."
Peltz last week told CNBC he would take his case to the US food and drinks giant's shareholders.
On Thursday, PepsiCo issued a letter to Peltz and his investment fund Trian Partners in which it dismissed the US billionaire's plan as "financial engineering" that "erodes value for shareholders rather than creates value".
Peltz's plan has divided the market. Another PepsiCo shareholder, Don Yacktman of investment fund Yacktman Asset Management, told CNBC on Friday: "I'm yet to be convinced that Nelson Peltz's ideas are in the best interests for a long-term shareholder."
Yacktman pointed to the "synergy" between PepsiCo's food and drinks operations, although he added: "I don't see, when you have synergy, that the issue is splitting the company up. The issue is more in management and some changes that need to be made at that level. I would like to see improvement in the capital allocation process and objectivity. I don't see that [Peltz's plan] is the solution."
Today, analysts at Sanford Bernstein issued results of a survey of 100 investors on whether PepsiCo should split. It said 55% supported a break-up but most do not believe it will happen in the next year or two. It seems this one will run and run.
French politicians have passed legislation that bans large stores from throwing away unsold food in a bid to tackle waste....
The make-up of the ingredients in baby food in the US is under some scrutiny, with Campbell Soup Co. and Nestle attracting criticism from consumer watchdogs....
UK cash-and-carry and convenience retailer Booker Group has struck a deal to buy the Londis and Budgens symbol retail chains from Ireland's Musgrave Group - and emphasised the changing retail landscap...
US efforts to liberalise international trade faced something of a roller coaster ride this week, as the Senate first voted down Barack Obama's proposals only to reach a compromise that would give the ...
- Why Arla upbeat about LatAm prospects
- M&A Watch - Could Cloetta be takeover target?
- Comment: Can Applegate retain trust under Hormel?
- Sweets & Snacks Expo: just-food's pick
- Why "added-value" is key in LatAm yoghurt
- Yildiz eyeing further deals - reports
- Weetabix gets new private-equity investor
- PAI, Pamplona "eyeing Bakkavor stake"
- Food industry news of week: GMOs, Arla, Mondelez
- FrieslandCampina ends Bongrain German tie-up
- Successful New Product Development Strategies in the Food, Drinks and Personal Care Market
- ALDI 2015: Radically transforming Anglo Saxon grocery markets
- The Future of the Ice Cream Market in the United Kingdom to 2019
- Marks & Spencer (Asia Pacific) Ltd in Retailing (Hong Kong, China)
- Consumer Foodservice in Indonesia